If you used a dwelling unit for personal purposes, it may be considered a "dwelling unit used as a home." If it is, you cannot deduct rental expenses that are more than your rental income for that dwelling unit. See Dwelling Unit Used as Home
and How To Figure Rental Income and Deductions
, later. If your dwelling unit is not considered a dwelling unit used as a home, you can deduct rental expenses that are more than rental income for the unit subject to certain limits. See Limits on Rental Losses
If you use the dwelling unit as a home and you rent it fewer than 15 days during the year, that period is not treated as rental activity. Do not include any of the rent in your income and do not deduct any of the rental expenses. To determine if you use a dwelling unit as a home, see Dwelling Unit Used as Home
A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. It also includes all structures or other property belonging to the dwelling unit. A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities.
A dwelling unit does not include property used solely as a hotel, motel, inn, or similar establishment. Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. taxmap/pub17/p17-047.htm#en_us_publink1000171701
You rent a room in your home that is always available for short-term occupancy by paying customers. You do not use the room yourself, and you allow only paying customers to use the room. The room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit.taxmap/pub17/p17-047.htm#en_us_publink1000171702
You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of:
- 14 days, or
- 10% of the total days it is rented to others at a fair rental price.
See What Is a Day of Personal Use
If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price, do not count that day as a day of rental use in applying (2) above. Instead, count it as a day of personal use in applying both (1) and (2) above. However, this rule does not apply when dividing expenses between rental and personal use. taxmap/pub17/p17-047.htm#en_us_publink1000171705
A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area.taxmap/pub17/p17-047.htm#en_us_publink1000171706
The following examples show how to determine whether you used your rental property as a home.taxmap/pub17/p17-047.htm#en_us_publink1000171707
You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. You rented the basement apartment at a fair rental price to college students during the regular school year. You rented to them on a 9-month lease (273 days). You figured 10% of the total days rented to others at a fair rental price is 27 days.
During June (30 days), your brothers stayed with you and lived in the basement apartment rent free.
Your basement apartment was used as a home because you used it for personal purposes for 30 days. Rent-free use by your brothers is considered personal use. Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days).taxmap/pub17/p17-047.htm#en_us_publink1000171708
You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. You figured 10% of the total days rented to others at a fair rental price is 3 days.
The room was used as a home because you used it for personal purposes for 21 days. That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days).taxmap/pub17/p17-047.htm#en_us_publink1000171709
You own a condominium apartment in a resort area. You rented it at a fair rental price for a total of 170 days during the year. For 12 of those days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. Your family actually used the apartment for 10 of those days. Therefore, the apartment is treated as having been rented for 160 (170 − 10) days. You figured 10% of the total days rented to others at a fair rental price is 16 days. Your family also used the apartment for 7 other days during the year.
You used the apartment as a home because you used it for personal purposes for 17 days. That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days).taxmap/pub17/p17-047.htm#en_us_publink1000171710
For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. Do not count them as days of personal use if:
- You rented or tried to rent the property for 12 or more consecutive months.
- You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property.
This special rule does not apply when dividing expenses between rental and personal use.
A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons.
- You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). However, see Use as Main Home Before or After Renting under Dwelling Unit Used as Home, earlier.
- A member of your family or a member of the family of any other person who owns an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.).
- Anyone under an arrangement that lets you use some other dwelling unit.
- Anyone at less than a fair rental price.
If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. taxmap/pub17/p17-047.htm#en_us_publink1000171715
This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. taxmap/pub17/p17-047.htm#en_us_publink1000171716
You use a dwelling unit for personal purposes if:
- You donate the use of the unit to a charitable organization,
- The organization sells the use of the unit at a fund-raising event, and
- The "purchaser" uses the unit.
The following examples show how to determine days of personal use.taxmap/pub17/p17-047.htm#en_us_publink1000171718
You and your neighbor are co-owners of a condominium at the beach. Last year, you rented the unit to vacationers whenever possible. The unit was not used as a main home by anyone. Your neighbor used the unit for 2 weeks last year; you did not use it at all.
Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. taxmap/pub17/p17-047.htm#en_us_publink1000171719
You and your neighbors are co-owners of a house under a shared equity financing agreement. Your neighbors live in the house and pay you a fair rental price.
Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. This is because your neighbors rent the house as their main home under a shared equity financing agreement. taxmap/pub17/p17-047.htm#en_us_publink1000171720
You own a rental property that you rent to your son. Your son does not own any interest in this property. He uses it as his main home and pays you a fair rental price.
Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. taxmap/pub17/p17-047.htm#en_us_publink1000171721
You rent your beach house to Joshua. Joshua rents his house in the mountains to you. You each pay a fair rental price.
You are using your house for personal purposes on the days that Joshua uses it because your house is used by Joshua under an arrangement that allows you to use his house. taxmap/pub17/p17-047.htm#en_us_publink1000171722
Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. taxmap/pub17/p17-047.htm#en_us_publink1000171723
If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. You can deduct expenses for the rental use of the unit under the rules explained in How To Figure Rental Income and Deductions
When dividing your expenses, follow these rules.
- Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. This rule does not apply when determining whether you used the unit as a home.
- Any day that the unit is available for rent but not actually rented is not a day of rental use.
Your beach cottage was available for rent from June 1 through August 31 (92 days). Your family uses the cottage during the last 2 weeks in May (14 days). You were unable to find a renter for the first week in August (7 days). The person who rented the cottage for July allowed you to use it over a weekend (2 days) without any reduction in or refund of rent. The cottage was not used at all before May 17 or after August 31.
You figure the part of the cottage expenses to treat as rental expenses as follows.
- The cottage was used for rental a total of 85 days (92 − 7). The days it was available for rent but not rented (7 days) are not days of rental use. The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend.
- You used the cottage for personal purposes for 14 days (the last 2 weeks in May).
- The total use of the cottage was 99 days (14 days personal use + 85 days rental use).
- Your rental expenses are 85/99 (86%) of the cottage expenses.
When determining whether you used the cottage as a home, the July weekend (2 days) you used it is personal use even though you received a fair rental price for the weekend. Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. If you have a net loss, you may not be able to deduct all of the rental expenses. See Property Used as a Home
in the following discussion.
How you figure your rental income and deductions depends on whether you used the dwelling unit as a home (see Dwelling Unit Used as Home
, earlier) and, if you used it as a home, how many days the property was rented at a fair rental price.
Your deductible rental expenses can be more than your gross rental income. However, see Limits on Rental Losses
If you use a dwelling unit as a home during the year (see Dwelling Unit Used as Home
, earlier), how you figure your rental income and deductions depends on how many days the unit was rented at a fair rental price.
If you use a dwelling unit as a home and you rent it fewer than 15 days during the year, do not include any rental income in your income. Also, you cannot deduct any expenses as rental expenses. taxmap/pub17/p17-047.htm#en_us_publink1000171735
If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. See How To Report Rental Income and Expenses
, later. If you had a net profit from the rental property for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. However, if you had a net loss, your deduction for certain rental expenses is limited.
To figure your deductible rental expenses and any carryover to next year, use Worksheet 9-1
at the end of this chapter.